Employment taxes are Federal income tax withholding, Social Security tax, Medicare tax, and Federal Unemployment tax that an employer must submit on behalf of employees. Under the Federal Insurance Contributions Act (FICA) 12.4% of earned income up to an annual limit must be paid into Social Security, and an additional 2.9% must be paid into Medicare. If the taxpayer is a wage or salaried employee, he or she pays only half the FICA bill, and the tax is automatically withheld. The employees and the employer's FICA tax rate for 2014 consists of the Social Security tax rate of 6.2% of each employee's first $117,000 of wages, salaries, etc. and the Medicare tax of 1.45% of each employee's total wages, salaries, etc. In other words, the FICA tax rate for 2014 is 7.65% of each employee's first $117,000 of wages, salaries, etc. and then 1.45% of each employee's wages, salaries, etc. that are above $117,000.
In addition to withholding Medicare tax at 1.45%, an employer must withhold a 0.9% Additional Medicare tax from wages he or she pays to an employee in excess of $200,000 in a calendar year. The employer is required to begin withholding Additional Medicare tax in the pay period in which he or she pays wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year.
Additional Medicare tax is only imposed on the employee. There is no employer share of Additional Medicare tax.
The Federal Unemployment Tax Act (FUTA) with state unemployment system, provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a Federal and a state unemployment tax. Only the employer pays FUTA tax; It is not deducted from the employee's wages.
Old-age, survivors, and disability insurance benefits (OASDI) payments under section 202 of title II of the social security act are not includible in the gross income of the individuals to whom they are paid. This applies to old-age insurance benefits, and insurance benefits for wives, husbands, children, widows, widowers, mothers and fathers, and parents, as well as the lump-sum death payment.
Self-employment tax is a tax consisting of social security and Medicare taxes primarily for individuals who work for themselves. It is similar to the social security and Medicare taxes withheld from the pay of most wage earners. An individual figures self-employment tax (SE Tax) using Schedule SE (Form 1040). Social Security and Medicare taxes of most wage earners are figured by their employers. Also the taxpayer can deduct the employer equivalent portion of the SE Tax in figuring adjusted gross income. Wage earners cannot deduct Social Security and Medicare taxes.
For self-employment income earned in 2014, the self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for Social Security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).
A Sin Tax is a state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. These types of taxes are levied by governments to discourage individuals from partaking in such activities without making the use of the products illegal. These taxes also provide a source of government revenue.
Revenue generated by sin taxes supports many projects imperative in accomplishing social and economic goals.
Excise taxes are taxes paid when purchases are made on a specific good, such as gasoline. Excise taxes are often included in the price of the product. There are also excise taxes on activities, such as on wagering or on highway usage by trucks. Excise tax has several general excise tax programs. One of the major components of the excise program is motor fuel. Excise taxes are usually paid initially by the manufacturer or retailer.
Property Tax is a capital tax on property imposed by municipalities; based on the estimated value of the property. Deductible real estate taxes are generally any state, local, or foreign taxes on real property. They must be charged uniformly against all property in the jurisdiction at a like rate. Many states and counties also impose local benefit taxes for improvements for streets, sidewalks, and sewer lines. These taxes cannot be deducted. However, a taxpayer can increase the cost basis of the property by the amount of the assessment. Local benefits taxes are deductible if they are for maintenance or repair, or interest charges related to those benefits.
Deductible personal property taxes are those based only on the value of personal property such as a boat or car. The tax must be charged to the taxpayer on a yearly basis, even if it is collected more than once a year or less than once a year.
Sales Taxes is a tax imposed by a state or local government on sales collected by retailers at the point-of-sale. It's based on a percentage of the selling prices of the goods and services. Forty five states, plus the District of Columbia impose a sales tax. If the taxpayer files a Form 1040, and itemizes deductions on Schedule A, he or she has the option of claiming either state and local income taxes or state and local sales taxes. (the taxpayer cannot claim both) if the taxpayer saved his or her receipts throughout the year he or she can add up the total amount of sales taxes actually paid and claim that amount.
Many states exempt charitable, religious, and certain other organizations from sales or use taxes on goods purchased for the organization's use. Generally such exemption does not apply to a trade or business conducted by the organization.
The Gift Tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value in return. The tax applies whether the donor intends the transfer to be a gift or not. The Gift Tax applies to the transfer by gift of any property. The taxpayer makes a gift if he or she gives property (including money), or the use of or income from property without expecting to receive something of at least equal value in return. If the taxpayer sells something at less than its full value or if he or she makes an interest-free or reduced-interest loan, he or she may be making a gift. The annual exclusion for gifts is $14,000 for the 2014 tax year.
Its considered non-taxable gifts:
- Gifts that are not more than the annual exclusion for the calendar year;
- Gifts to a political organization for its use;
- Gifts to charities;
- Gifts to one's (US Citizen) spouse;
- Tuition or medical expenses one pays directly to a medical or educational institution for someone. Donor must pay the expense directly. If donor writes a check to donee and donee then pays the expense, the gift may be subject to tax.
Estate Tax is a tax levied on an heir's inherited portion of an estate if the value of the estate exceeds an exclusion limit set by law. The Estate Tax is mostly imposed on assets left to heirs, but it does not apply to the transfer of assets to a surviving spouse. The right of spouses to leave any amount to one another is known as the "Unlimited Marital Deduction".
When someone in your family dies and the property of the deceased transfers to you, the federal government imposes an estate tax on the value of all that property. You only pay estate tax when the tax on the net taxable estate exceeds your remaining balance of the unified credit.
Use Form 706
